Intuit Inc. (INTU) reported adjusted loss per share from continuing operations of 15 cents in the fourth quarter of 2014, which was not only wider than both the Zacks Consensus Estimate of a loss of 5 cents as well as the year-ago quarter loss of 11 cents. Adjusted earnings include stock-based compensation but exclude amortization and other one-time expense.
Despite Intuit’s disappointing bottom-line performance, it reported revenues of $714 million, up 12.6% on a year-over-year basis and beat the Zacks Consensus Estimate of $702 million. The year-over-year increase was attributed to higher customer additions and increased adoption of Intuit’s cloud-based solutions.
Product revenues increased 9.3% year over year to $271 million, while Services and Other revenues were up 14.8% from the year-ago quarter to $443 million.
Segment-wise, Small Business Group recorded 12% year-over-year growth due to higher adoption rate of Intuit’s cloud-based solutions. The company witnessed 40% increase in QuickBooks Online subscribers with 60k net subscriber additions. The company ended fiscal 2014 with approximately 700,000 QuickBooks Online subscribers and above 1 million QuickBooks subscribers in total. However, QuickBooks desktop units declined 10% during the quarter.
Nonetheless, management expects QuickBooks Online will add more subscribers to the QuickBooks segment despite the decline in desktop units.
Now coming to the operational metrics, Intuit reported a 14.4% year-over-year increase in its operating expenses primarily due to higher spending on research & development (up 15.4% year over year) and general & administrative expenses (up 15.7% year over year).
These higher investments resulted in an adjusted operating loss (including share-based compensation but excluding amortization expenses) of $54 million which widened from a loss of $42 million reported in the year-ago period.
Intuit’s adjusted net loss from continuing operations (including share-based compensation but excluding amortization expenses) came in at $45.3 million compared with a loss of $33.7 million reported in the year-ago quarter.
Intuit ended the quarter with cash, equivalents and investments of $1.91 billion versus $2.63 billion in the previous quarter. Long-term debt remained flat sequentially at $499.0 million.
Intuit generated $1.45 billion in cash from operations in fiscal 2014. During the period, Intuit repurchased shares worth $1.58 billion and paid $220 million as dividends.
Outlook
Intuit provided its first-quarter 2015 guidance. The company expects revenues in the range of $620 to $630 million, significantly lower than the Zacks Consensus Estimate of $681 million. Management expects non-GAAP operating loss in the range of $80 to $85 million and forecasts its non-GAAP loss per share in between 20 cents and 21 cents. The Zacks Consensus Estimate is pegged at a loss of 13 cents.
The company has also issued fiscal 2015 outlook. For fiscal 2015, the company expects revenues in the range of $4.275 to $4.375 billion, 5% to 3% year-over-year decline. The Zacks Consensus Estimate is pegged at $4.855 billion. However, considering the increase in deferred revenues and the higher-than-expected adoption of QuickBooks Online, the company expects adjusted revenues to grow in the range of 5% to 8% ($4.75–$4.85 billion).
Non-GAAP operating income is projected in the range of $1.11 to $1.14 billion. Non-GAAP earnings per share are expected between $2.45 and $2.50. The Zacks Consensus Estimate is pegged at $3.52.
The company also outlined some of its financial targets up to fiscal 2017. Management expects revenues to grow 9% annually and reach approximately at $5.8 billion in fiscal 2017. Non-GAAP earnings are expected to increase at a CAGR of 13% during the period. Management expects QuickBooks Online subscribers to be 2 million which is significantly higher than 683,000 subscribers reported at the end of fiscal 2014.
Our Take
Intuit reported dismal fourth-quarter bottom-line numbers despite an encouraging top-line performance. The company also provided tepid guidance for the next quarter.
We are positive on Intuit’s growing SMB exposure and believe that the strategic acquisitions will continue to support the segment. The increased adoption of its cloud-based services and products is another positive factor. The company has also restructured its small business to focus more on its QuickBooks services. It expects to continue its investments in the QuickBooks portfolio. Thus, higher investments will impact the company’s profitability in the near term.
Also, stiff competition from the other payroll solution providers such as Paychex Inc. (PAYX) and Automatic Data Processing (ADP), seasonality of Intuit’s tax business and the ongoing uncertainty remain the headwinds.
Currently, Intuit has a Zacks Rank #3 (Hold).
Investors may have a look at Stratasys (SSYS) which sports a Zacks Rank #1 (Strong Buy).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report
Be the first to comment